Walgreens posts $265 million net loss in Q1
The company cited lower retail sales and higher costs, though pharmacy sales did increase slightly year-over-year.
Photo: Joe Raedle/Getty Images
Citing lower retail sales, Walgreens said it has lost $265 million in its first fiscal quarter, which ended November 30 – a sharp decline compared to the $67 million net loss posted in its first quarter a year ago.
Adjusted operating income was also lower this year at $539 million, compared to $687 million a year ago.
According to Walgreens, the increase in operating loss reflects higher costs related to the Footprint Optimization Program in the U.S. Retail Pharmacy segment, and both operating loss and adjusted operating income reflect lower U.S. retail sales and lapping prior year sale-leaseback gains, partly offset by cost savings initiatives and growth in the U.S. Healthcare segment.
Adjusted net earnings decreased 23% to $440 million, down 23.2% on a constant currency basis, reflecting lower adjusted operating income.
One bright spot was sales for Walgreens' U.S. healthcare business, which hit $2.2 billion, a 12% increase over last year.
"VillageMD sales of $1.6 billion grew 9% year-on-year despite the impact of clinic closures," said Walgreens CEO Tim Wentworth. "The increase was driven by growth in full risk lives and fee-for-service revenue."
In an August filing with the Securities and Exchange Commission, Walgreens said it was considering selling all of its VillageMD primary care clinics.
WHAT'S THE IMPACT
The U.S. Retail Pharmacy segment had first quarter sales of $30.9 billion, an increase of 6.6% from the year-ago quarter. Comparable sales increased 8.5 percent from that time.
Pharmacy sales increased 10.4% and comparable pharmacy sales increased 12.7% in the quarter, each benefiting from higher branded drug inflation and prescription volume, Walgreens said. Comparable prescriptions filled in the first quarter increased 2.3% from the year-ago quarter while comparable prescriptions excluding immunizations increased 3.5%.
"Among the outcomes we achieved this quarter, in U.S. pharmacy, we maintained script market share, our international business continued to show strong returns, and our U.S. healthcare segment contributed somewhat above expectations on a combination of revenue growth and cost control," said Wentworth. "Importantly, we started to progress on the opportunities that we consider essential to our longer-term turnaround."
Retail sales decreased 6.2% and comparable retail sales decreased 4.6% compared to the year-ago quarter, which Walgreens said reflects a weaker cough cold flu season and lower sales in discretionary categories.
Wentworth said Walgreens plans on closing about 450 of its retail locations in 2025.
The U.S. Healthcare segment had first quarter sales of $2.2 billion, with growth in all businesses compared to the year-ago quarter. VillageMD sales increased 9%, CareCentrix increased 16% and Shields increased 30%.
Due to the improved performance at VillageMD and Shields, operating loss was $325 million compared to $436 million in the prior year period.
And the International segment had first quarter sales of $6.4 billion, an increase of 10.2% from the year-ago quarter, including a favorable currency impact of 3.6%. Sales increased 6.5% on a constant currency basis, with the Germany wholesale business growing 11.3% and Boots UK sales growing 4.5%.
THE LARGER TREND
Walgreens has had its financial challenges this year. In September it agreed to pay $106.8 million to resolve allegations that it billed the government for prescriptions never dispensed. The Department of Justice alleged that, between 2009 and 2020, Walgreens submitted false claims for payment to Medicare, Medicaid and other federal healthcare programs for prescriptions that it processed but were never picked up by beneficiaries.
As a result, Walgreens received tens of millions of dollars for prescriptions that it never actually provided, the DOJ said.
In November – though it denied any wrongdoing – Walgreens said it was paying $100 million to settle a seven-year-old class action lawsuit alleging the company inflated drug prices. The class action suit, Russo v. Walgreens Co., dragged out over seven years in "hard-fought litigation," according to court documents.
Last summer the company said it was shuttering up to 25% of its retail stores that are unprofitable.
Jeff Lagasse is editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.
